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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Sleep Number Corporation Com USD0.01 | NASDAQ:SCSS | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 32.50 | 31.41 | 35.46 | 0 | 01:00:00 |
|
|
|
Minnesota
|
|
41-1597886
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
9800 59th Avenue North
|
|
|
Minneapolis, Minnesota
|
|
55442
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large accelerated filer
|
ý
|
|
|
Accelerated filer
o
|
Non-accelerated filer
|
o
|
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
o
|
|
|
|
|
Emerging growth company
o
|
|
|
|
Page
|
|
|
|
|
|
||
|
|
|
Item 1.
|
Financial Statements
(unaudited)
|
|
|
||
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
|
||
|
July 1,
2017 |
|
December 31,
2016 |
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
2,082
|
|
|
$
|
11,609
|
|
Accounts receivable, net of allowance for doubtful accounts of $856 and $884, respectively
|
24,486
|
|
|
19,705
|
|
||
Inventories
|
69,856
|
|
|
75,026
|
|
||
Income taxes receivable
|
3,681
|
|
|
—
|
|
||
Prepaid expenses
|
10,686
|
|
|
8,705
|
|
||
Other current assets
|
18,397
|
|
|
23,282
|
|
||
Total current assets
|
129,188
|
|
|
138,327
|
|
||
|
|
|
|
|
|||
Non-current assets:
|
|
|
|
|
|||
Property and equipment, net
|
205,621
|
|
|
208,367
|
|
||
Goodwill and intangible assets, net
|
78,678
|
|
|
80,817
|
|
||
Deferred income taxes
|
—
|
|
|
4,667
|
|
||
Other non-current assets
|
27,243
|
|
|
24,988
|
|
||
Total assets
|
$
|
440,730
|
|
|
$
|
457,166
|
|
|
|
|
|
|
|||
Liabilities and Shareholders’ Equity
|
|
|
|
|
|||
Current liabilities:
|
|
|
|
|
|||
Borrowings under revolving credit facility
|
$
|
13,950
|
|
|
$
|
—
|
|
Accounts payable
|
105,593
|
|
|
105,375
|
|
||
Customer prepayments
|
45,725
|
|
|
26,207
|
|
||
Accrued sales returns
|
12,602
|
|
|
15,222
|
|
||
Compensation and benefits
|
29,051
|
|
|
19,455
|
|
||
Taxes and withholding
|
6,547
|
|
|
23,430
|
|
||
Other current liabilities
|
39,195
|
|
|
35,628
|
|
||
Total current liabilities
|
252,663
|
|
|
225,317
|
|
||
|
|
|
|
|
|||
Non-current liabilities:
|
|
|
|
|
|||
Deferred income taxes
|
307
|
|
|
—
|
|
||
Other non-current liabilities
|
73,321
|
|
|
71,529
|
|
||
Total liabilities
|
326,291
|
|
|
296,846
|
|
||
|
|
|
|
|
|||
Shareholders’ equity:
|
|
|
|
|
|||
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value; 142,500 shares authorized, 41,066 and 43,569 shares issued and outstanding, respectively
|
411
|
|
|
436
|
|
||
Additional paid-in capital
|
—
|
|
|
—
|
|
||
Retained earnings
|
114,028
|
|
|
159,884
|
|
||
Total shareholders’ equity
|
114,439
|
|
|
160,320
|
|
||
Total liabilities and shareholders’ equity
|
$
|
440,730
|
|
|
$
|
457,166
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Net sales
|
$
|
284,673
|
|
|
$
|
276,878
|
|
|
$
|
678,572
|
|
|
$
|
629,858
|
|
Cost of sales
|
108,054
|
|
|
105,617
|
|
|
255,494
|
|
|
249,523
|
|
||||
Gross profit
|
176,619
|
|
|
171,261
|
|
|
423,078
|
|
|
380,335
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|||||||
Sales and marketing
|
144,498
|
|
|
134,785
|
|
|
313,764
|
|
|
285,453
|
|
||||
General and administrative
|
28,819
|
|
|
27,018
|
|
|
62,588
|
|
|
57,924
|
|
||||
Research and development
|
6,363
|
|
|
7,062
|
|
|
13,959
|
|
|
14,664
|
|
||||
Total operating expenses
|
179,680
|
|
|
168,865
|
|
|
390,311
|
|
|
358,041
|
|
||||
Operating (loss) income
|
(3,061
|
)
|
|
2,396
|
|
|
32,767
|
|
|
22,294
|
|
||||
Other expense, net
|
(282
|
)
|
|
(229
|
)
|
|
(420
|
)
|
|
(326
|
)
|
||||
(Loss) income before income taxes
|
(3,343
|
)
|
|
2,167
|
|
|
32,347
|
|
|
21,968
|
|
||||
Income tax (benefit) expense
|
(2,565
|
)
|
|
751
|
|
|
8,664
|
|
|
7,583
|
|
||||
Net (loss) income
|
$
|
(778
|
)
|
|
$
|
1,416
|
|
|
$
|
23,683
|
|
|
$
|
14,385
|
|
|
|
|
|
|
|
|
|
||||||||
Basic net (loss) income per share:
|
|
|
|
|
|
|
|
|
|
||||||
Net (loss) income per share – basic
|
$
|
(0.02
|
)
|
|
$
|
0.03
|
|
|
$
|
0.56
|
|
|
$
|
0.30
|
|
Weighted-average shares – basic
|
41,716
|
|
|
46,394
|
|
|
42,233
|
|
|
47,247
|
|
||||
Diluted net (loss) income per share:
|
|
|
|
|
|
|
|
|
|
||||||
Net (loss) income per share – diluted
|
$
|
(0.02
|
)
|
|
$
|
0.03
|
|
|
$
|
0.55
|
|
|
$
|
0.30
|
|
Weighted-average shares – diluted
|
41,716
|
|
|
47,044
|
|
|
43,080
|
|
|
47,945
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Net (loss) income
|
$
|
(778
|
)
|
|
$
|
1,416
|
|
|
$
|
23,683
|
|
|
$
|
14,385
|
|
Other comprehensive income – unrealized gain on available-for-sale marketable debt securities, net of income tax
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
||||
Comprehensive (loss) income
|
$
|
(778
|
)
|
|
$
|
1,416
|
|
|
$
|
23,683
|
|
|
$
|
14,399
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Total
|
|||||||||||
|
Shares
|
|
Amount
|
|
|
|
||||||||||||
Balance at December 31, 2016
|
43,569
|
|
|
$
|
436
|
|
|
$
|
—
|
|
|
$
|
159,884
|
|
|
$
|
160,320
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
23,683
|
|
|
23,683
|
|
||||
Exercise of common stock options
|
180
|
|
|
2
|
|
|
2,652
|
|
|
—
|
|
|
2,654
|
|
||||
Stock-based compensation
|
581
|
|
|
6
|
|
|
7,870
|
|
|
—
|
|
|
7,876
|
|
||||
Repurchases of common stock
|
(3,264
|
)
|
|
(33
|
)
|
|
(10,522
|
)
|
|
(69,539
|
)
|
|
(80,094
|
)
|
||||
Balance at July 1, 2017
|
41,066
|
|
|
$
|
411
|
|
|
$
|
—
|
|
|
$
|
114,028
|
|
|
$
|
114,439
|
|
|
Six Months Ended
|
||||||
|
July 1,
2017 |
|
July 2,
2016 |
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
23,683
|
|
|
$
|
14,385
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|||
Depreciation and amortization
|
31,177
|
|
|
27,960
|
|
||
Stock-based compensation
|
7,876
|
|
|
7,606
|
|
||
Net loss on disposals and impairments of assets
|
2
|
|
|
7
|
|
||
Excess tax benefits from stock-based compensation
|
—
|
|
|
(472
|
)
|
||
Deferred income taxes
|
4,974
|
|
|
985
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|||
Accounts receivable
|
(4,781
|
)
|
|
5,489
|
|
||
Inventories
|
5,170
|
|
|
12,904
|
|
||
Income taxes
|
(14,532
|
)
|
|
15,324
|
|
||
Prepaid expenses and other assets
|
2,110
|
|
|
(6,838
|
)
|
||
Accounts payable
|
11,858
|
|
|
(15,282
|
)
|
||
Customer prepayments
|
19,518
|
|
|
(26,885
|
)
|
||
Accrued compensation and benefits
|
9,834
|
|
|
9,249
|
|
||
Other taxes and withholding
|
(6,032
|
)
|
|
1,654
|
|
||
Other accruals and liabilities
|
(2,050
|
)
|
|
1,034
|
|
||
Net cash provided by operating activities
|
88,807
|
|
|
47,120
|
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(27,132
|
)
|
|
(23,764
|
)
|
||
Proceeds from marketable debt securities
|
—
|
|
|
15,090
|
|
||
Proceeds from sales of property and equipment
|
—
|
|
|
67
|
|
||
Decrease in restricted cash
|
3,150
|
|
|
—
|
|
||
Net cash used in investing activities
|
(23,982
|
)
|
|
(8,607
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
||
Repurchases of common stock
|
(80,094
|
)
|
|
(71,366
|
)
|
||
Net increase in short-term borrowings
|
3,098
|
|
|
12,574
|
|
||
Proceeds from issuance of common stock
|
2,654
|
|
|
1,623
|
|
||
Excess tax benefits from stock-based compensation
|
—
|
|
|
472
|
|
||
Debt issuance costs
|
(10
|
)
|
|
(409
|
)
|
||
Net cash used in financing activities
|
(74,352
|
)
|
|
(57,106
|
)
|
||
|
|
|
|
||||
Net decrease in cash and cash equivalents
|
(9,527
|
)
|
|
(18,593
|
)
|
||
Cash and cash equivalents, at beginning of period
|
11,609
|
|
|
20,994
|
|
||
Cash and cash equivalents, at end of period
|
$
|
2,082
|
|
|
$
|
2,401
|
|
|
July 1,
2017 |
|
December 31,
2016 |
||||
Raw materials
|
$
|
5,740
|
|
|
$
|
7,973
|
|
Work in progress
|
95
|
|
|
72
|
|
||
Finished goods
|
64,021
|
|
|
66,981
|
|
||
|
$
|
69,856
|
|
|
$
|
75,026
|
|
|
July 1, 2017
|
|
December 31, 2016
|
||||||||||||
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
||||||||
Developed technologies
|
$
|
18,851
|
|
|
$
|
5,615
|
|
|
$
|
18,851
|
|
|
$
|
4,524
|
|
Customer relationships
|
2,413
|
|
|
2,413
|
|
|
2,413
|
|
|
1,365
|
|
||||
Trade names/trademarks
|
101
|
|
|
101
|
|
|
101
|
|
|
101
|
|
||||
|
$
|
21,365
|
|
|
$
|
8,129
|
|
|
$
|
21,365
|
|
|
$
|
5,990
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Amount repurchased under Board-approved share repurchase program
|
|
$
|
25,000
|
|
|
$
|
20,000
|
|
|
$
|
75,000
|
|
|
$
|
70,000
|
|
Amount repurchased in connection with the vesting of employee restricted stock grants
|
|
300
|
|
|
125
|
|
|
5,094
|
|
|
1,366
|
|
||||
Total amount repurchased
|
|
$
|
25,300
|
|
|
$
|
20,125
|
|
|
$
|
80,094
|
|
|
$
|
71,366
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Stock awards
|
|
$
|
3,584
|
|
|
$
|
3,261
|
|
|
$
|
6,720
|
|
|
$
|
6,412
|
|
Stock options
|
|
588
|
|
|
579
|
|
|
1,156
|
|
|
1,194
|
|
||||
Total stock-based compensation expense
|
|
4,172
|
|
|
3,840
|
|
|
7,876
|
|
|
7,606
|
|
||||
Income tax benefit
|
|
1,406
|
|
|
1,325
|
|
|
2,654
|
|
|
2,624
|
|
||||
Total stock-based compensation expense, net of tax
|
|
$
|
2,766
|
|
|
$
|
2,515
|
|
|
$
|
5,222
|
|
|
$
|
4,982
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Interest expense
|
$
|
(288
|
)
|
|
$
|
(251
|
)
|
|
$
|
(470
|
)
|
|
$
|
(357
|
)
|
Interest income
|
6
|
|
|
22
|
|
|
50
|
|
|
31
|
|
||||
Other expense, net
|
$
|
(282
|
)
|
|
$
|
(229
|
)
|
|
$
|
(420
|
)
|
|
$
|
(326
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Net (loss) income
|
$
|
(778
|
)
|
|
$
|
1,416
|
|
|
$
|
23,683
|
|
|
$
|
14,385
|
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|||||||
Basic weighted-average shares outstanding
|
41,716
|
|
|
46,394
|
|
|
42,233
|
|
|
47,247
|
|
||||
Dilutive effect of stock-based awards
|
—
|
|
|
650
|
|
|
847
|
|
|
698
|
|
||||
Diluted weighted-average shares outstanding
|
41,716
|
|
|
47,044
|
|
|
43,080
|
|
|
47,945
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net (loss) income per share – basic
|
$
|
(0.02
|
)
|
|
$
|
0.03
|
|
|
$
|
0.56
|
|
|
$
|
0.30
|
|
Net (loss) income per share – diluted
|
$
|
(0.02
|
)
|
|
$
|
0.03
|
|
|
$
|
0.55
|
|
|
$
|
0.30
|
|
|
Six Months Ended
|
||||||
|
July 1,
2017 |
|
July 2,
2016 |
||||
Balance at beginning of year
|
$
|
15,222
|
|
|
$
|
20,562
|
|
Additions that reduce net sales
|
32,434
|
|
|
35,419
|
|
||
Deductions from reserves
|
(35,054
|
)
|
|
(40,226
|
)
|
||
Balance at end of period
|
$
|
12,602
|
|
|
$
|
15,755
|
|
|
Six Months Ended
|
||||||
|
July 1,
2017 |
|
July 2,
2016 |
||||
Balance at beginning of year
|
$
|
8,633
|
|
|
$
|
10,028
|
|
Additions charged to costs and expenses for current-year sales
|
4,243
|
|
|
6,601
|
|
||
Deductions from reserves
|
(3,665
|
)
|
|
(7,290
|
)
|
||
Changes in liability for pre-existing warranties during the current year, including expirations
|
(55
|
)
|
|
(1,515
|
)
|
||
Balance at end of period
|
$
|
9,156
|
|
|
$
|
7,824
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Risk Factors
|
•
|
Overview
|
•
|
Results of Operations
|
•
|
Liquidity and Capital Resources
|
•
|
Non-GAAP Data
|
•
|
Off-Balance-Sheet Arrangements and Contractual Obligations
|
•
|
Critical Accounting Policies
|
•
|
Current and future general and industry economic trends and consumer confidence;
|
•
|
The effectiveness of our marketing messages;
|
•
|
The efficiency of our advertising and promotional efforts;
|
•
|
Our ability to execute our Company-Controlled distribution strategy;
|
•
|
Our ability to achieve and maintain acceptable levels of product and service quality, and acceptable product return and warranty claims rates;
|
•
|
Our ability to continue to improve and expand our product line, and consumer acceptance of our products, product quality, innovation and brand image;
|
•
|
Industry competition, the emergence of additional competitive products and the adequacy of our intellectual property rights to protect our products and brand from competitive or infringing activities;
|
•
|
The potential for claims that our products, processes or trademarks infringe the intellectual property rights of others;
|
•
|
Availability of attractive and cost-effective consumer credit options;
|
•
|
Our “just-in-time” manufacturing processes with minimal levels of inventory, which may leave us vulnerable to shortages in supply;
|
•
|
Our dependence on significant suppliers and our ability to maintain relationships with key suppliers, including several sole-source suppliers;
|
•
|
Rising commodity costs and other inflationary pressures;
|
•
|
Risks inherent in global sourcing activities;
|
•
|
Risks of disruption in the operation of either of our two main manufacturing facilities;
|
•
|
Increasing government regulation;
|
•
|
Pending or unforeseen litigation and the potential for adverse publicity associated with litigation;
|
•
|
The adequacy of our management information systems to meet the evolving needs of our business and existing and evolving regulatory standards applicable to data privacy and security;
|
•
|
The costs and potential disruptions to our business related to upgrading our management information systems;
|
•
|
The vulnerability of our management information systems to attacks by hackers or other cyber threats that could compromise the security of our systems or disrupt our business;
|
•
|
Our ability to attract, retain and motivate qualified management, executive and other key employees, including qualified retail sales professionals and managers; and
|
•
|
Uncertainties arising from global events, such as terrorist attacks or a pandemic outbreak, or the threat of such events.
|
•
|
Net sales for the
three months ended
July 1, 2017
increased
3%
to
$285 million
, compared with
$277 million
for the same period one year ago. Net sales for the three months ended July 1, 2017 were affected by an approximately $25 million shift in sales from our second quarter to our third quarter (representing approximately 9 percentage points (ppt.) of additional growth over the prior year) as a result of a delay in deliveries and shipments related to an inventory shortage from one of our new suppliers. The issue has been resolved and we don't expect a shortage in the future. We now have the necessary inventory to fulfill our outstanding second-quarter orders and the new supplier's production output has been exceeding our forecasted demand for the third quarter and beyond.
|
•
|
The
3%
sales
increase
was driven by 8 ppt. of growth from sales generated by
43
net new stores opened in the past 12 months, partially offset by a
4%
comparable sales
decline
in our Company-Controlled channel.
|
•
|
Sales per store (for stores open at least one year), on a trailing twelve-month basis for the period ended
July 1, 2017
were
$2.3 million
, consistent with the prior-year comparable period.
|
•
|
In May 2017 we began selling our Sleep Number 360™ i7 and i10 smart beds. The Sleep Number 360 smart bed won 13 awards at CES, including being named the Best of Innovation Honoree in the Home Appliance category. We will continue the changeover of our entire product line to our Sleep Number 360 smart beds in a phased implementation over the next nine months.
|
•
|
Operating loss for the quarter totaled
$3.1 million
, or
(1.1%)
of net sales, compared with operating income of
$2.4 million
, or
0.9%
of net sales, for the same period one year ago. The decrease in operating income was attributable to the $25 million sales shift.
|
•
|
Net loss for the quarter was
$0.8 million
, or
$(0.02)
per diluted share, compared with net income of
$1.4 million
, or
$0.03
per diluted share, for the same period one year ago.
|
•
|
Cash provided by operating activities totaled
$89 million
for the
six months ended
July 1, 2017
, compared with
$47 million
for the same period one year ago. Investing activities for the current-year period included
$27 million
of property and equipment purchases, compared with
$24 million
for the same period last year.
|
•
|
At
July 1, 2017
, cash and cash equivalents totaled
$2 million
and we ended the quarter with $14 million of borrowings under our $153 million revolving credit facility, as planned. We utilize our credit facility to meet our seasonal working capital requirements.
|
•
|
In the
second
quarter of
2017
, we repurchased
0.8 million
shares of our common stock under our Board-approved share repurchase program at a cost of
$25 million
(an average of
$30.13
per share). As of
July 1, 2017
, the remaining authorization was
$170 million
.
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||
|
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||||||||||||||
Net sales
|
|
$
|
284.7
|
|
|
100.0
|
%
|
|
$
|
276.9
|
|
|
100.0
|
%
|
|
$
|
678.6
|
|
|
100.0
|
%
|
|
$
|
629.9
|
|
|
100.0
|
%
|
Cost of sales
|
|
108.1
|
|
|
38.0
|
%
|
|
105.6
|
|
|
38.1
|
%
|
|
255.5
|
|
|
37.7
|
%
|
|
249.5
|
|
|
39.6
|
%
|
||||
Gross profit
|
|
176.6
|
|
|
62.0
|
%
|
|
171.3
|
|
|
61.9
|
%
|
|
423.1
|
|
|
62.3
|
%
|
|
380.3
|
|
|
60.4
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Sales and marketing
|
|
144.5
|
|
|
50.8
|
%
|
|
134.8
|
|
|
48.7
|
%
|
|
313.8
|
|
|
46.2
|
%
|
|
285.5
|
|
|
45.3
|
%
|
||||
General and administrative
|
|
28.8
|
|
|
10.1
|
%
|
|
27.0
|
|
|
9.8
|
%
|
|
62.6
|
|
|
9.2
|
%
|
|
57.9
|
|
|
9.2
|
%
|
||||
Research and development
|
|
6.4
|
|
|
2.2
|
%
|
|
7.1
|
|
|
2.6
|
%
|
|
14.0
|
|
|
2.1
|
%
|
|
14.7
|
|
|
2.3
|
%
|
||||
Total operating expenses
|
|
179.7
|
|
|
63.1
|
%
|
|
168.9
|
|
|
61.0
|
%
|
|
390.3
|
|
|
57.5
|
%
|
|
358.0
|
|
|
56.8
|
%
|
||||
Operating (loss) income
|
|
(3.1
|
)
|
|
(1.1
|
%)
|
|
2.4
|
|
|
0.9
|
%
|
|
32.8
|
|
|
4.8
|
%
|
|
22.3
|
|
|
3.5
|
%
|
||||
Other expense, net
|
|
(0.3
|
)
|
|
(0.1
|
%)
|
|
(0.2
|
)
|
|
(0.1
|
%)
|
|
(0.4
|
)
|
|
(0.1
|
%)
|
|
(0.3
|
)
|
|
(0.1
|
%)
|
||||
(Loss) income before income taxes
|
|
(3.3
|
)
|
|
(1.2
|
%)
|
|
2.2
|
|
|
0.8
|
%
|
|
32.3
|
|
|
4.8
|
%
|
|
22.0
|
|
|
3.5
|
%
|
||||
Income tax (benefit) expense
|
|
(2.6
|
)
|
|
(0.9
|
%)
|
|
0.8
|
|
|
0.3
|
%
|
|
8.7
|
|
|
1.3
|
%
|
|
7.6
|
|
|
1.2
|
%
|
||||
Net (loss) income
|
|
$
|
(0.8
|
)
|
|
(0.3
|
%)
|
|
$
|
1.4
|
|
|
0.5
|
%
|
|
$
|
23.7
|
|
|
3.5
|
%
|
|
$
|
14.4
|
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net (loss) income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
|
$
|
(0.02
|
)
|
|
|
|
|
$
|
0.03
|
|
|
|
|
$
|
0.56
|
|
|
|
|
$
|
0.30
|
|
|
|
|
||
Diluted
|
|
$
|
(0.02
|
)
|
|
|
|
|
$
|
0.03
|
|
|
|
|
$
|
0.55
|
|
|
|
|
$
|
0.30
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Weighted-average number of common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
|
41.7
|
|
|
|
|
|
46.4
|
|
|
|
|
42.2
|
|
|
|
|
47.2
|
|
|
|
|
||||||
Diluted
|
|
41.7
|
|
|
|
|
|
47.0
|
|
|
|
|
43.1
|
|
|
|
|
47.9
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||
Company-Controlled channel
|
|
97.7
|
%
|
|
96.6
|
%
|
|
98.0
|
%
|
|
97.0
|
%
|
Wholesale/Other channel
|
|
2.3
|
%
|
|
3.4
|
%
|
|
2.0
|
%
|
|
3.0
|
%
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||
Sales change rates:
|
|
|
|
|
|
|
|
|
|
|
||
Retail comparable-store sales
(1)
|
|
(6
|
%)
|
|
(7
|
%)
|
|
(1
|
%)
|
|
(5
|
%)
|
Online and Phone
|
|
26
|
%
|
|
(2
|
%)
|
|
22
|
%
|
|
3
|
%
|
Company-Controlled comparable sales change
|
|
(4
|
%)
|
|
(6
|
%)
|
|
0
|
%
|
|
(5
|
%)
|
Net opened/closed stores
|
|
8
|
%
|
|
6
|
%
|
|
9
|
%
|
|
5
|
%
|
Total Company-Controlled channel
|
|
4
|
%
|
|
0
|
%
|
|
9
|
%
|
|
0
|
%
|
Wholesale/Other channel
|
|
(31
|
%)
|
|
21
|
%
|
|
(27
|
%)
|
|
15
|
%
|
Total net sales change
|
|
3
|
%
|
|
1
|
%
|
|
8
|
%
|
|
1
|
%
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Average sales per store
(1)
($ in thousands)
|
|
$
|
2,335
|
|
|
$
|
2,333
|
|
|
|
|
|
||||
Average sales per square foot
(1)
|
|
$
|
906
|
|
|
$
|
937
|
|
|
|
|
|
||||
Stores > $1 million in net sales
(1)
|
|
97
|
%
|
|
98
|
%
|
|
|
|
|
||||||
Stores > $2 million in net sales
(1)
|
|
58
|
%
|
|
59
|
%
|
|
|
|
|
||||||
Average revenue per mattress unit –
Company-Controlled channel
(2)
|
|
$
|
4,306
|
|
|
$
|
4,206
|
|
|
$
|
4,155
|
|
|
$
|
4,074
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||
Beginning of period
|
|
546
|
|
|
497
|
|
|
540
|
|
|
488
|
|
Opened
|
|
8
|
|
|
19
|
|
|
24
|
|
|
33
|
|
Closed
|
|
(5
|
)
|
|
(10
|
)
|
|
(15
|
)
|
|
(15
|
)
|
End of period
|
|
549
|
|
|
506
|
|
|
549
|
|
|
506
|
|
|
|
Six Months Ended
|
||||||
|
|
July 1,
2017 |
|
July 2,
2016 |
||||
Total cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
88.8
|
|
|
$
|
47.1
|
|
Investing activities
|
|
(24.0
|
)
|
|
(8.6
|
)
|
||
Financing activities
|
|
(74.4
|
)
|
|
(57.1
|
)
|
||
Net decrease in cash and cash equivalents
|
|
$
|
(9.5
|
)
|
|
$
|
(18.6
|
)
|
|
|
Three Months Ended
|
|
Trailing-Twelve
Months Ended
|
||||||||||||
|
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Net (loss) income
|
|
$
|
(778
|
)
|
|
$
|
1,416
|
|
|
$
|
60,715
|
|
|
$
|
25,067
|
|
Income tax (benefit) expense
|
|
(2,565
|
)
|
|
751
|
|
|
25,597
|
|
|
11,691
|
|
||||
Interest expense
|
|
288
|
|
|
251
|
|
|
924
|
|
|
497
|
|
||||
Depreciation and amortization
|
|
14,918
|
|
|
14,053
|
|
|
60,170
|
|
|
53,261
|
|
||||
Stock-based compensation
|
|
4,172
|
|
|
3,840
|
|
|
12,231
|
|
|
12,068
|
|
||||
Asset impairments
|
|
2
|
|
|
14
|
|
|
47
|
|
|
66
|
|
||||
Adjusted EBITDA
|
|
$
|
16,037
|
|
|
$
|
20,325
|
|
|
$
|
159,684
|
|
|
$
|
102,650
|
|
|
|
Six Months Ended
|
|
Trailing-Twelve
Months Ended
|
||||||||||||
|
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||||||
Net cash provided by operating activities
|
|
$
|
88,807
|
|
|
$
|
47,120
|
|
|
$
|
193,332
|
|
|
$
|
110,008
|
|
Subtract: Purchases of property and equipment
|
|
27,132
|
|
|
23,764
|
|
|
61,220
|
|
|
70,412
|
|
||||
Free cash flow
|
|
$
|
61,675
|
|
|
$
|
23,356
|
|
|
$
|
132,112
|
|
|
$
|
39,596
|
|
|
|
Trailing-Twelve
Months Ended
|
||||||
|
|
July 1,
2017 |
|
July 2,
2016 |
||||
Net operating profit after taxes (NOPAT)
|
|
|
|
|
||||
Operating income
|
|
$
|
87,124
|
|
|
$
|
37,035
|
|
Add: Rent expense
(1)
|
|
70,815
|
|
|
64,232
|
|
||
Add: Interest income
|
|
112
|
|
|
219
|
|
||
Less: Depreciation on capitalized operating leases
(2)
|
|
(17,956
|
)
|
|
(16,749
|
)
|
||
Less: Income taxes
(3)
|
|
(46,095
|
)
|
|
(27,055
|
)
|
||
NOPAT
|
|
$
|
94,000
|
|
|
$
|
57,682
|
|
|
|
|
|
|
||||
Average invested capital
|
|
|
|
|
||||
Total equity
|
|
$
|
114,439
|
|
|
$
|
173,807
|
|
Less: Cash greater than target
(4)
|
|
—
|
|
|
—
|
|
||
Add: Long-term debt
(5)
|
|
—
|
|
|
—
|
|
||
Add: Capitalized operating lease obligations
(6)
|
|
566,520
|
|
|
513,856
|
|
||
Total invested capital at end of period
|
|
$
|
680,959
|
|
|
$
|
687,663
|
|
Average invested capital
(7)
|
|
$
|
690,524
|
|
|
$
|
724,593
|
|
Return on invested capital (ROIC)
(8)
|
|
13.6
|
%
|
|
8.0
|
%
|
(a) – (b)
|
Not applicable.
|
(c)
|
Issuer Purchases of Equity Securities
|
Fiscal Period
|
|
Total
Number
of Shares
Purchased
(1)(2)
|
|
Average
Price
Paid
per Share
|
|
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
(1)
|
|
Approximate
Dollar Value
of Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
(3)
|
||||||
April 2, 2017 through April 29, 2017
|
|
198,182
|
|
|
$
|
27.82
|
|
|
188,257
|
|
|
$
|
189,756,000
|
|
April 30, 2017 through May 27, 2017
|
|
301,412
|
|
|
30.07
|
|
|
301,264
|
|
|
180,697,000
|
|
||
May 28, 2017 through July 1, 2017
|
|
341,114
|
|
|
31.44
|
|
|
340,290
|
|
|
170,000,000
|
|
||
Total
|
|
840,708
|
|
|
$
|
30.09
|
|
|
829,811
|
|
|
$
|
170,000,000
|
|
|
(1)
|
Under our Board-approved
$300 million
share repurchase program, we repurchased
829,811
shares of our common stock at a cost of
$25 million
(based on trade dates) during the three months ended
July 1, 2017
.
|
(2)
|
In connection with the vesting of employee restricted stock grants, we also repurchased
10,897
shares of our common stock at a cost of
$0.3 million
during the three months ended
July 1, 2017
.
|
(3)
|
There is no expiration date governing the period over which we can repurchase shares under our Board-approved share repurchase program. Any repurchased shares are constructively retired and returned to an unissued status.
|
Exhibit
Number
|
|
Description
|
|
Method of Filing
|
10.1
|
|
First Amendment, dated June 22, 2017, to Lease Agreement between DCI 1001 Minneapolis Venture, LLC, as Landlord, and Select Comfort Corporation, as Tenant, dated October 21, 2016
|
|
Filed herewith
|
10.2
|
|
Amended and Restated Executive Severance Pay Plan dated as of June 12, 2017
|
|
Filed herewith
|
31.1
|
|
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
31.2
|
|
Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
32.1
|
|
Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|
|
Furnished herewith
|
32.2
|
|
Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|
|
Furnished herewith
|
101
|
|
The following financial information from the Company's Quarterly Report on Form 10-Q for the period ended July 1, 2017, filed with the SEC on July 28, 2017, formatted in eXtensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets as of July 1, 2017 and December 31, 2016; (ii) Condensed Consolidated Statements of Operations for the three and six months ended July 1, 2017 and July 2, 2016; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 1, 2017 and July 2, 2016; (iv) Condensed Consolidated Statement of Shareholders' Equity for the six months ended July 1, 2017; (v) Condensed Consolidated Statements of Cash Flows for the six months ended July 1, 2017 and July 2, 2016; and (vi) Notes to Condensed Consolidated Financial Statements.
|
|
Filed herewith
|
|
|
SELECT COMFORT CORPORATION
|
|
||
|
|
(Registrant)
|
|
||
|
|
|
|
||
Dated:
|
July 28, 2017
|
By:
|
|
/s/ Shelly R. Ibach
|
|
|
|
|
|
Shelly R. Ibach
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
(principal executive officer)
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Robert J. Poirier
|
|
|
|
|
|
Robert J. Poirier
|
|
|
|
|
|
Chief Accounting Officer
|
|
|
|
|
|
(principal accounting officer)
|
|
Exhibit
Number
|
|
Description
|
|
Method of Filing
|
10.1
|
|
First Amendment, dated June 22, 2017, to Lease Agreement between DCI 1001 Minneapolis Venture, LLC, as Landlord, and Select Comfort Corporation, as Tenant, dated October 21, 2016
|
|
Filed herewith
|
10.2
|
|
Amended and Restated Executive Severance Pay Plan dated as of June 12, 2017
|
|
Filed herewith
|
31.1
|
|
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
31.2
|
|
Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
32.1
|
|
Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|
|
Furnished herewith
|
32.2
|
|
Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|
|
Furnished herewith
|
101
|
|
The following financial information from the Company's Quarterly Report on Form 10-Q for the period ended July 1, 2017, filed with the SEC on July 28, 2017, formatted in eXtensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets as of July 1, 2017 and December 31, 2016; (ii) Condensed Consolidated Statements of Operations for the three and six months ended July 1, 2017 and July 2, 2016; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 1, 2017 and July 2, 2016; (iv) Condensed Consolidated Statement of Shareholders' Equity for the six months ended July 1, 2017; (v) Condensed Consolidated Statements of Cash Flows for the six months ended July 1, 2017 and July 2, 2016; and (vi) Notes to Condensed Consolidated Financial Statements.
|
|
Filed herewith
|
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